Setup a Small Business in Canada
Setting up a small business in Canada requires determination, motivation, high moral and know-how of the business. Following are the steps you need to follow to start up with small business.
Identify Your Business Opportunity: Identify the best possible business for you from the multiple opportunities. It is important to find where you desire lie to understand your personality type.
Prepare a Business Plan: Business plan is must for any business, a business plan permits you to gain a better understanding of your industry structure, competitive landscape, and the capital requirements. Business Analyst observes that companies with business plan have 50% more profits and revenue than non-planning businesses. Writing a business plan just makes good business sense.
Get Start-up Money: To start any business, capital investment is must. Start-up funds for every business is different depending on type of business selected. Finding the money you need may come from a source you never thought of. In Canada the sources of getting money are following:
Canada Small Business Loan Program:
It helps you with your financing needs. Under this program, the Government of Canada makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders. Program works following ground:
- Who is Eligible: Business which can carry profit with gross annual revenues $5 million or less.
- Who is not eligible: Business which does not fall under Canada Small Business Financial Program is farming business, non-profit organizations, charitable trust and religious organizations.
- How much financing is available?: Provides up to $500,000 of financing, from this no more than $350,000 can be used for purchasing leasehold improvements or improving leased property and purchasing or improving new or used equipment.
- How to apply for Loan?: You need to apply for loan at your bank. If the bank decides to grant you a loan, they register it with Industry Canada. The list of lenders are ATB Financial, Bank of East Asia, Bank of Montreal, Caisses populaires Acadiennes, Caisses populaires de l’Ontario, Canada’s Credit Unions, Canadian Imperial Bank of Commerce, Canadian Western Bank, GE Capital Financial Services, HSBC, Laurentian Bank of Canada, Mouvement des caisses Desjardins, National Bank of Canada, Royal Bank of Canada, Scotiabank, TD Canada Trust.
Note: Agri-Food Canada has a similar program for the farming industry.
Canadian Youth Business Foundation:
- It is a national charity that provides young entrepreneurs.
- Young entrepreneurs from 18 to 34 may get up to $15,000 as a start up capital, with flexible three to five year repayment schedules.
- 2-year mentoring program need to be attended where you are matched up with dedicated business mentors or business professionals.
Business Development Bank of Canada (BDC):
- It is a financial institution wholly owned by the Government of Canada. BDC plays a vital role in delivering financial and consulting services to Canadian small and medium-sized businesses.
- Co-Vision loan can be up to $100,000, which can be repaid over 6 years. If needed, entrepreneurs can postpone principal payments for 12 months.
- Co-Vision specifically targets businesses in the manufacturing, distribution, services and tourism sectors.
- Projects such as working capital, acquisitions, fixed assets, marketing and start-up costs, or the purchase of a franchise can also be financed under Co-Vision.
Name Your Business: What’s in a business name? Find the right name which will distinguish you from your competitors, provide your customers with a reason to hire you, and aid in the branding of your company. Learn what you need to know to find a name for your business.
Select a Business Structure: Deciding on the Business Structure is very important decision; this decision should not be taken lightly. Whether you choose the popular Limited Liability Company (LLC), a sole proprietorship or form a corporation; your choice will have an impact on your business liability, fund-ability as well as taxes due.
Get Your Business License and Permits: Depending on your chosen business structure, may need to register your business with the state authorities. Setting up your small business may require an employer identification number (EIN) which is also used by state taxing authorities to identify businesses. Additional paperwork can entail sales tax licenses, zoning permits and more.
Set Up Your Business Location: One of the multitude of tasks in starting a business is the setting up of your office. There are many steps in office set up including where to locate your office (home or office space), buying the necessary office equipment, designing your work space and getting supplies.
Get Business Insurance: As a new small business owner, you have the responsibility to manage the risks associated with your business. Don’t put your new start-up at risk without getting the proper small business insurance to protect your company in the event of disaster or litigation.
Maintain Accounting System: Unless you’re from accounting or finance background, the accounting and bookkeeping aspect of running your business can’t be avoided. Maintaining your Accounts will help you to understand the financials of running a business and advert failure.
Along with the above you also need to know business legal structures, taxes like GST, PST, Payroll tax and Corporate Income Tax and employer obligations. You can also acquire information from any Business Directory Canada, Online Directory Canada, Yellow Pages Canada or Business Telephone Directory Canada.
Conclusions: There are many entrepreneurs who have lost their everything due to failure in their business. This article will help as a pathway to those who need to Setup a Small Business in Canada.
Ranvir S Bahl is a Director at Canada Business Solutions. An online business directory in Canada helps you to search local businesses information, advertising in Canada, business listing in Canada.
Small Business FAQ:
Question: In Canada, what Government services exist for small businesses?
And are they all provincial government services? Does Ottawa grant money to provincial governments using a Small Business Administration?
Answer: Its mostly tax credits and small business loans for businesses that qualify. As far as I have ever seen there is no such thing as a SBA in Canada.
Question: Where can I get info for taxes for a small Canada home-business?
I have been told with a small business you can claim taxes every 7 years. Where do I find info on this type of stuff?
Answer: You can get info from the CRA (Canada Revenue Agency) website. The guide you are looking for is called Guide for small businesses. However, I do not know who told you about the 7 years thing, but it is wrong. You must file every year and remit GST either monthly, or quarterly, and keep records for 7 years as Revenue Canada can go back 7 years to do audits.
Question: How do I incorporate a small business in Canada (BC) specifically? Is it really expensive?
Answer: I cannot comment on the price of incorporating in BC specifically, but I incorporated a numbered corporation in Ontario for under $600 earlier this year. I did all the legwork to get the PST/GST/Federal Payroll tax account, and provincial tax-type accounts, so I saved a few dollars doing that part.
Question: How to file taxes for a very small business in Canada?
I am in the midst of opening my own dog grooming business out of my home. I do not have a business number or registered name and was told that I don’t have to have one. I do not have a business account because I don’t have a registered business name and was again told that I do not need to have one. I will be making under $30,000 a year and do not need to charge GST.
Answer: As a sole proprietor you will do the same as an employee fill out the T1 tax form but sense you also have self employment/business income you will also fill out the T2125 form and come up with a net income or loss. Like you said you do not have to register your business as long as you don’t have employees, collect GST over $30,000 import or export goods or are incorporated. However you are responsible for adding any profits to your total income for the year and pay the taxes on it. So now is a good time because your income is low. Now is the time to start filling out the form and claiming and keeping receipts for your expenses. On the T2125 form line8521 to 9270 are expenses you can claim.
Question: Can a Canadian citizen do a business in UK and live there with family?
I am a Canadian citizen and living in Canada with my family. I want to start a small business in UK and want to move there with my family. What type of visa do we require? Can I get a loan from Canada or in UK to start a business?
Answer: No you cannot get a loan to start a business. You need to have a business in Canada already so that you can show proof that you already KNOW how to run a business. You need to have several thousand GB pounds saved up and you have to get it legally – it cannot be a loan or a gift
Question: How can I have a credit loan for Small Business in Canada, if I don’t have a good credit history or a property?
My business partner and me want to buy a small business: cafe-restaurant. We have a business plan, a license, a business name and a registered company. The only thing we don’t have is money to buy this business. We’ve looked everywhere: All the banks wants a good credit history or a property. We need $150,000.
Answer: When you made your business plan and business model showing your cost for start up. You should have recognized your situation at that time and taken appropriate action then. You went ahead and did your companies registration premature.
There are companies in Canada that help in these situations. Banks and lending institutions will want a personal guarantee on the loan when your business is less than two years old. After two years the business should qualify on its own without your personal credit.
Question: How do I open a small business in New Brunswick, Canada? And how do I pay an assistant?
I currently provide in home child care and I provide my clients with receipts and year end income tax receipts, I also claim my income on my income tax each year. I am considering hiring an assistant but I’m not sure if I need to have some sort of business number or tax number etc. And I also don’t know how I go about paying this assistant in regards to taking taxes off etc, any help would be greatly appreciated.
Answer: You will need to have a BN. You can open one online, and can obtain the information for deductions online as well. Unless you’re willing to allow the person to have tremendous freedom, it wouldn’t meet the criteria for them to be a self employed/contract person; they’d be your employee. CRA also puts on small business seminars aimed at instructing you on Payroll deductions. They are free.
As a self-employed person (as you know) there is some degree of risk of loss. You have a space dedicated to child care, you advertise to get my clients, you could lose money if no-one signed up. You will likely want control over your relationship with this assistant (you’ll decide their hours of work, you’ll provide their work location, you’ll provide all the toys, food, etc, for the children, all of the clients will be yours, and not theirs, they won’t be allowed to hire a replacement to show up in their stead, etc).
Question: I run an online small business in Canada but it is unregistered. Can I still write off expenses against income?
Answer: Yes you can. Even as an individual you should only have to pay taxes on any income that exceeds your expenses. Keep all your receipts as evidence. You should get an accountant to help prepare your tax return to make sure you have done everything correctly. You may have to register to collect sales tax (GST) if your sales are greater than a certain amount.